The key new feature though, already creating a storm of angry reactions in the forums, is the Anonymous Tables.

We have decided to introduce Anonymous Tables across all tables, both cash game and tournament tables. This is perfectly in line with Bodog Recreational Poker Model, our strategy of focusing on net depositing players. The anonymity will protect them by creating a more level playing field. This will mean that net depositing players get more entertainment for their money which will increase player retention. Player tracker tools and HUD’s are net depositing players’ biggest enemy, and we are now effectively stopping these from ever working on our software again. We will lose some users of these tools but that is only going to create a better environment for the net depositing players who are actually the ones generating the revenue through their deposits. In the poker forums (winning) players are furious which I can understand—like most predators they are not the best suited to look after an eco-system.

We have talked about Bodog Recreational Poker Model for over two years, and I have noticed that many competitors nowadays say what we are saying: that recreational players are important. But in reality not much has changed, poker sites still run rake races and other promotions clearly aimed at attracting winning players. An example of not getting it quite right is how Party Poker and Microgaming have implemented Anonymous Tables. At those sites they are an alternative to normal tables. The problem with that is that the net depositing players who would benefit from playing anonymously do not realize that and sit down at the normal tables. The winning players then follow the net depositing players which means that nobody plays at the anonymous tables.

The only way to grow poker is to attract more recreational players and to give them a good player experience. That is what Bodog Recreation Poker Model is all about, and November’s software release was a big step in the right direction.

Jonas Ödman
Vice President, Bodog Network

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The online poker history is much shorter but shows a similar pattern. In the early days of online poker, the norm was that 10% of the players in MTT’s would get paid, with the winner getting at least 30% of the prize pool. Online poker rooms have since then gradually flattened the payout structures, and now you can see MTT’s that pay 15% of the field and the winner is getting only 15% of the prize pool. There is one main reason for doing this, and it is perfectly in line with Bodog’s Recreational Poker Model: A higher percentage of the prize pool will be awarded to net depositing players. The reason for this is that net depositing players are rarely competing for the top prizes in MTT’s but they will occasionally make it into the money. Making the net depositing players happy is key for success for every poker room—it is their deposits that generate revenue for the poker room.

The other side of the same coin is that less money will be awarded to withdrawing players, which means that more money will stay in the poker ecosystem instead of being withdrawn

Pokerstars recently launched time based tournaments. These will result in a flatter payout structure than we have ever seen in MTT’s before. Their shortest time based tournaments (15 minutes) will pay around half the field, and even though their longest (180 minutes) will pay about the same percentage of players as a standard MTT, it will be much flatter. The question is if Pokerstars is taking it too far here. There is a limit for how far you can go before it is not poker anymore. There has to be a gambling element, and as Doyle Brunson said when Patrik Antonius asked how Doyle could (correctly) call his all-in raise with pocket threes at a WPT final table: “We’re playing poker, not solitaire.”

Jonas Ödman
Vice President, Bodog Network

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The direct negative effect for these two poker rooms will be twofold:

1. It will attract more winning players, thereby decreasing the net deposits.

2. The lowered rake itself will decrease the gross revenue.

There will also be an indirect negative effect from the worse experience the net depositing players at these rooms will get. Because of the winning players that these promotions will attract they will lose their deposits quicker than before—the lower rake will not fully compensate for that. That in turn will have a negative effect on their willingness to redeposit.

So why are Party and Titan doing this? For Titan this could be a way of ring-fencing their players from (rakeback) players belonging to other sites in the iPoker network. I have not seen this promotion on any other room in the iPoker network. Still, even viewed in that light it will only attract the wrong type of players. For Party Poker, I would assume that they are willing to try anything to stop the negative trend for their poker revenue that started more than three years ago. This will not be the cure though.

In the iPoker network model there is a system to punish operators who bring too many winning players to the network. Ongame, part of the Bwin.Party group, have an even better system which is more similar to the Bodog Network model. When I analyzed the different systems in September last year, the Ongame system is superior to the simple iPoker model.

It is interesting that Titan are now doing something that is completely against their own network policy. And the fact that Party Poker launched a “rake free” promotion only a few weeks after Ongame increased the rake with 33% on their low limit cash game tables shows that there is no common poker strategy in the Bwin.Party group—they are moving in opposite directions.

Jonas Ödman
Vice President, Bodog Network

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The French system taxes cash game pots and tournament prize pools at 2%, which may sound low but since the revenue poker operators typically take from cash game pots is capped at 5% and from tournaments around 10%, the actual tax level is roughly 40+% and 20% of the revenue, respectively. Even pots where no rake is taken are taxed. This system forces French poker operators to impose the tax directly onto the players by increasing the rake, giving the players less entertainment for their money. I predicted and I still believe that this will lead to a higher churn rate but I have not seen any numbers confirming that yet.

The Florida online poker bill that passed the Senate committee yesterday has a way superior system. Instead of taxing pots and tournament prize pools, it taxes gaming revenue and the tax level is 10%, which is more reasonable. The 10% tax is probably lower than what most current US poker operators have to pay their payment providers today so it is unlikely that poker companies would have to increase the rake to afford the taxes.

Poker companies like Pokerstars and Full Tilt are excluded from getting a Florida license because they have accepted wagers after UIGEA was passed by Congress in 2006. At the same time it is a requirement that “the applicant has existing and established experience with Internet gaming”, which means that the bill seems designed for European poker networks. Some lobbyists have obviously been more successful than others. It is still uncertain whether this bill will become law but it is interesting to follow the process in different states.

Jonas Ödman
Vice President, Bodog Network

Poker News

I think the industry is now heading in the opposite direction. We will have balkanization instead of consolidation, and player liquidity will no longer be viewed as the key to success.

The PWin merger is, of course, big news in the industry but I do not see that as the start of a consolidation phase. As Steven Stradbrooke pointed out in his analysis of the merger, there are a number of question marks around how successful this merger will be and the driving forces behind it. More recently, the stock market has given its verdict.

Striving for player liquidity has been a way of catering for the winning players. Remember, that before Bodog opened up the debate about depositing players versus winning ones, these winning players were considered “high rakers” and everyone was competing for them. It feels like a long time ago now but it was actually less than two years ago. Having a large pool of net depositing players was a way of competing for these winning players, but the user experience of the net depositing players was not seen as important.

As a natural consequence of the focus on player liquidity everyone has expected the online poker industry to enter a consolidation phase. However, Patrik Selin challenged the consolidation issue more than a year ago and did Kim Lund, an e-gaming analyst, wrote a series of articles on liquidity in October 2010.

Sure, to run a successful poker room you need a critical mass to keep the games going, but after you have achieved that level of players, liquidity is not key anymore. The battlefield of the future in my view is entertainment and since different players have different ideas of what is entertainment is we will for the first time in the short history of online poker start to see differentiation in poker rooms.

Some players may find it important to be able to chat in their own language, others may want a user experience close to what you can get playing a video game. Some players may find tournaments with huge fields more entertaining than small fields. For those players, player liquidity will continue to be an important entertainment factor, but for the majority of players, liquidity has a small part to play of the total entertainment package.

Jonas Ödman
Vice President, Bodog Network

Poker News

These companies will be taxed 2 percent on all cash game pots and tournament buy-ins (including rebuys and add-ons, where applicable). There is a €1 cap for cash game pots but there is no cap for tournaments. Cash games pots where there is no flop are also taxed — including when everyone folds to the Big Blind.

Poker companies can then choose whether to impose this tax on their customers by increasing the rake and tournament fees, or take the tax from their own margins. Poker industry leader Pokerstars have choosen to impose everything on the players, and this has caused a big stir among players. It even lead to a three hours long “strike” on Sunday evening with players sitting down at cash game tables and then sitting out to block the seats.

What impact would that extra 2 percent rake have on the poker players? First of all, it turns most winning players into losing players, but from a poker site’s perspective, that is not necessarily bad. The bread and butter for all poker sites are the net depositing players. What is bad though is that it gives all players a worse user experience.

Without rake, poker is a zero-sum game. The rake makes an average poker player a losing player, and an increase of the rake will make an average poker player lose their money quicker. We ran a query for one million NL Hold’em hands played on Bodog on $0.10/$0.25, $0.25/$0.50, $0.50/$1 and $1/$2 to see what effect an increased rake from 5% to 7% and an increased cap to $3.5 (this is exactly the rake structure Pokerstars.fr use, but in Euros) would have had. The rake would have increased with 36.7%. (Without the rake on pots without a flop the increase would be 33.6%.)

This increased price would give an average player 26.8% less hands before he runs out of money. The “little” 2 percent extra rake may not sound as much, but 26.8% less entertainment paints a more troublesome picture. Casual players typically do not understand or care about the concept of rake, so it will not have a negative effect on sign-ups, but the decreased entertainment value per Euro will have a significant negative effect on the churn rate.

Another EU country, Sweden, chose another path when they introduced online poker through the government-owned Svenska Spel in 2006. Advised by poker professionals, they chose to offer 50% lower rake than the industry standard. Svenska Spel have 6,758 betting shops, slots machines at 2,187 locations, and invest roughly 100M Euros per year in marketing (including sponsorship). Through the combination of this strong brand and low price for poker, Svenska Spel had an instant success on the poker market. In 2007, Svenska Spel averaged 3,000–3,500 players per day—quite remarkable, especially since they only accept Swedish customers. However, after only a few years, their poker revenue is dropping and in 2009 their net gaming revenue from poker was 22% lower than in 2008. There are many possible explanations for this: the player pool in Sweden may not be big enough, the marketing has not been good enough, or the poker boom is simply over.

It will be interesting to see how fast the French online poker market will rise and fall with the opposite price strategy, and if any poker company will manage to be profitable in that environment.

Jonas Ödman
Vice President
Bodog Network

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It is reasonable to ask whether online poker is on the decline. I think it is, at least in the markets which were hit by the poker boom early. Casual players who used to play online poker are now spending their money elsewhere. Without fresh money from players who play for entertainment value and are actually willing to lose, the revenue for the poker companies will inevitably decrease and the games will become tougher for the remaining players. The latter is something I often hear poker players complain about nowadays.

Now it is more important than ever to focus on bringing in new casual players instead of the traditional strategy of catering to the winning players by offering them extreme multi-tabling functionality and other tools to make it easier for them to win the casual players’ money. Also, the money which today is unnecessarily spent on retaining the winning players through different reward programs should be spent on casual players. The winning players will stay anyway.

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In the B2B relationship between poker networks and poker operators, winning players have historically been overvalued. As all winning players know, the more casual players there is on a poker network, the more attractive the network will be. However, the way the revenue (rake) has been split between operators has not reflected the true value of the players the operators have brought to the network. Operators with a high proportion winning players have gained from this, while operators with more casual players have lost. Because of this, the operators have competed aggressively for the winning players, often with rakeback. When more money is spent on retaining winning players, less money is spent on attracting casual players.

Poker networks have tried to solve this in different ways. Some have banned rakeback and tried to police it, some have tried to cap rakeback, and some have even allowed their biggest operators to ring-fence their players to stop intra-network competition. None of this has worked out very well.
Most poker networks are now addressing this problem in a new way, but there are different schools: the two most extreme examples are the “Bodog Network school” and the “Playtech/Boss Media school”. (Microgaming has taking a cautious approach by making only a marginal change, and I think their rakeback problems will persist.)

Bodog Network is going to solve the root of the problem by changing the way the revenue is split between players at each table, to better reflect the true value of the players. Playtech and Boss Media have chosen another strategy. They will keep the skewed way of splitting the rake, and then fine operators who gain too much from it. It is obviously an inferior model but it was probably easier to implement. The problem for the operators with this model is that winning players might actually cost money. Some operators have already reacted by shutting some of their winning players out – it is an understandable reaction, but at the same time it is hurting these networks’ credibility. I am a winning poker player myself, and I would not want to be treated like this.

Bodog Network’s model is different. Operators on Bodog Network can never lose money because they bring a winning player to the network—the value of a player cannot be less than zero. A winning player will be worth very little, but at least something. To run a profitable business, operators will have to invest in marketing and try to attract casual players to the network. If they succeed, they will be making more money than they would on any other network.
It will be interesting to see if other poker networks are going to join the “Bodog Network school” or the “Playtech/Boss Media school”.

Enough said about B2B. How will this affect the winning players? There are two clear advantages for you:
• There will be a big pool of casual players for you to play against.
• No operator on Bodog Network will stop you from playing.

You will have to win the money at the tables yourself though, and not rely on rakeback or other awards. I think the big pool of casual players will increase your ROI to fully compensate for that, but time will tell.

Fair enough? Well, it’s poker.

Jonas Ödman is Vice President of the Bodog Network.

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